Car insurance

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Car Insurance

(about 178 slides)

How insurance works

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You pay a little money

How insurance works

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If you don’t have an accident, the insurance

company keeps your money

How insurance works

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If you do have an accident, the insurance

company pays a lot

How insurance works

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They will pay up to the limit of your policy

How insurance works

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If you purchased a $15,000 policy, they will

pay up to $15,000

$15,000

How insurance works

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If you purchased a $100,000 policy, they will

pay up to $100,000

$100,000

How insurance works

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The money you pay is called the “premium”

How insurance works

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You might pay every month,or every three months,

or every six months(you decide)

How insurance works

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You might pay every month,or every three months,

or every six months(you decide)

(Paying ahead is a little cheaper)

How insurance works

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You pay a premium


company keeps your premium

How insurance works

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You pay a premium


company keeps your premium

504 months and counting

Car insurance is not one

thing.

It comes in pieces.

You don’t have to buy all the

pieces.

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Like going to the HomeTown

buffet, when you buy car

insurance, you don’t have to

buy everything

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Car insurance has 7 parts7 premiums7 policy limits

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You don’thave to buyall 7 parts.

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In California, only 2 parts are required

by law.

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7 parts of a car insurance policy

1. Bodily Injury Liability insurance

2. Property Damage Liability insurance

3. Collision insurance

4. Comprehensive insurance

5. Medical Payments insurance

6. Uninsured Motorist insurance

7. Towing and Road Service insurance

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Required in California








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What Liability is

– This is an example of baby talk.

Some teenagers say, “It really wasn’t my fault. It was just an accident.”

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What Liability is

• In the grown-up world we have the idea of negligence.

• You are negligent if you should have been more careful.

• It’s your fault if you are negligent.• Now you have to pay for what you did. It’s

your fault. Crying won’t help. You are liable.

Two parts of car insurance are required by the state of

California.

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Bodily Injury Liability InsuranceYou hurt another person’s body.

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Bodily Injury Liability InsuranceYou will have to pay all their medical bills.

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Bodily Injury Liability InsuranceYou will have to pay all their medical bills or, if

you have Bodily Injury Liability car insurance, the insurance company will pay (up to the limit of your policy).

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Bodily Injury Liability• You hurt another person’s body• You have to pay for their injuries

because it was your fault—you are “liable”

For example, you drive into someone who is walking in a crosswalk and break their leg

Bodily Injury Liability

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You need Bodily Injury Liability insurance to pay the cost of their medical bills, pain and suffering.


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You need Bodily Injury Liability insurance to pay the cost of their medical bills, pain and suffering.

You paid a small premium

Your insurance company will pay for their medical bills,

pain and suffering (up to the limit of your policy)

$15,000


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REQUIRED!

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• Required by the state of California• You must buy Bodily Injury Liability

insurance – You must buy at least $15,000 of BI in case

you hurt one person in an accident– You must also buy at least $30,000 of BI in

case you hurt more than one person in an accident

– This is called 15/30 BI insurance

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What if you have $15,000 of Bodily Injury Liability insurance but the other person’s medical bills come to $265,000?

$265,000 damage

$15,000 of bodily injury insurance

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What if you have $15,000 of Bodily Injury Liability insurance but the other person’s medical bills come to $265,000?

You pay the remaining $250,000.

$265,000 damage


$250,000 paid by you

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Bodily Injury LiabilityPerhaps your parents will have

to sell their house to get the money to pay.

$265,000 damage


$250,000 paid by you

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Bodily Injury LiabilityBuy lots of Bodily Injury Liability

insurance!

$265,000 damage


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• Are you covered by BI insurance?– You smash into another car and the other

driver’s head is hurt

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• Are you covered by BI insurance?– You smash into another car and the other

driver’s head is hurt

Yes, they are hurt and it’s your fault

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• Are you covered by BI insurance?– You hit a dog and break it’s leg

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• Are you covered by BI insurance?– You hit a dog and break it’s leg

No, dogs are not people

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• Are you covered by BI insurance?– You skid off the road and crack your head on

the driver’s window

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• Are you covered by BI insurance?– You skid off the road and crack your head on

the driver’s window

No, BI covers other people you hurt, not you

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• Are you covered by BI insurance?– You run into a telephone pole and your

passenger, a friend of yours, gets a gash on their forearm.

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• Are you covered by BI insurance?– You run into a telephone pole and your

passenger, a friend of yours, gets a gash on their forearm.

Yes, they are hurt; it’s your fault.

Note: if your passenger is a member of your household, they would probably NOT be covered by BI insurance.

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Property Damage LiabilityYou damage another person’s property. For

example, their fence.

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Property Damage Liability

• You damage another person’s property

• You have to pay for the damage because it was your fault—you are “liable”– For example, you crash into someone’s car

damaging their car.

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You need Property Damage Liability insurance to cover the cost of repairing or replacing their property.


Your insurance company will pay to repair or replace their property

(up to the limit of your policy)

$5,000


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REQUIRED!

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• Required by the state of California• You must buy Property Damage Liability

insurance – You must buy at least $5,000 of PD in case

you damage another person’s property

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What if you have $5,000 of Property Damage Liability insurance but the other person’s car repair bills come to $15,000?

$15,000 damage

$5,000 of property damage

insurance

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What if you have $5,000 of Property Damage Liability insurance but the other person’s car repair bills come to $15,000?

You pay the remaining $10,000

$15,000 damage


insurance

$10,000 paid by you

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What if you don’t have $10,000?

$15,000 damage


insurance

$10,000 paid by you

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$15,000 damage


insurance

$10,000 paid by you

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$15,000 damage


insurance

$10,000 paid by you

Future wages garnished.

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Liability Insurance, in general

Minimum required Bodily Injury Liability and Property Damage Liability is often referred to as: 15/30/5 insurance

$15,000 for hurting one person in an accident$30,000 for hurting all the people in an accident$5,000 for Property Damage

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• Are you covered by PD insurance?– You skid off the road and crash into a wooden

fence

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• Are you covered by PD insurance?– You skid off the road and crash into a wooden

fence

Yes, you damaged someone else’s property—their fence. Your Property Damage Liability insurance will pay to repair the fence.

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• Are you covered by PD insurance?– You are driving under the speed limit. A dog

runs into the street and you hit it. The dog is hurt.

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• Are you covered by PD insurance?– You are driving under the speed limit. A dog

runs into the street and you hit it. The dog is hurt.

No, you are not at fault. Dogs are required by law to be under the control of their owners at all times. You are not liable. You do not have to pay the medical bills for the dog.

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• Are you covered by PD insurance?– You crash into the car in front of you. No one

is hurt.

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• Are you covered by PD insurance?– You crash into the car in front of you. No one

is hurt.

Yes, you damaged someone else’s property—their car. Your Property Damage Liability insurance will pay to repair the other person’s car.

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• Are you covered by PD insurance?– You skid off the road and roll into small pond.

Your car has $2,000 of damage.

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• Are you covered by PD insurance?– You skid off the road and roll into small pond.

Your car has $2,000 of damage.

No, you damaged your own property—not someone else’s. Property Damage Liability only pays for other people’s property.

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Collision insurance

Your car is damaged in a crash or “upset”

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“Collision”

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“Upset”

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Collision• Pays to have YOUR car

repaired.

• Collision coverage will repair or replace your car up to value of your car– For example: You crash your car into a brick

wall. It will take $10,000 to repair your car. Your car is only worth $6,000. The insurance company will only pay you $6,000 to replace your car.

CollisionWill only pay for

repairing your car if the cost of repair is less than the value of your car.

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Collision will not pay $4,000 to repair a car that is only worth $200.

Collision insurance

How do people know the value of your car?

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“Kelly Blue Book”

www.kbb.com

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Collision insurance• Has a “deductible”

– You pay the deductible before the insurance begins to pay for the repair

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Your insurance company will pay to repair or replace your car (up to

the value of your car)

Value of your car

You pay the deductible

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– A typical deductible might be $500 or $1000




Value of your car


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$2000 damage

– For example: You have $2000 of collision damage and a $500 deductible collision insurance policy.

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– For example: You have $2000 of collision damage and a $500 deductible collision insurance policy. You will pay $500 and the insurance company will pay the remaining $1,500

$2000 damage

$500 deductible paid

by you

$1500 paid by insurance company

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$600 damage

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Collision• Has a “deductible”


– For example: You have $600 of collision damage and a $500 deductible collision insurance policy. You will pay $500 and the insurance company will pay the remaining $100

$600 damage


by you


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$400 damage

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– For example: You have $400 of collision damage and a $500 deductible collision insurance policy. You will pay $400 and the insurance company will pay nothing.

$400 damage


by you

Collision

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OPTIONAL

Collision is expensive

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This part of car insurance is often the most expensive part.

$


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Cost of insurance depends on your car.

$


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Cost of insurance depends on your car.

$


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You can reduce your premium by increasing your deductible.


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Premium

$500 deductible

Premium

$1000 deductible

Car Value Car Value


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If you have a older car that you’re not making payments on, you may consider not buying this insurance at all.

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Collision insurance

Collision is NOT required by the state of California

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Collision insurance

• Are you covered by Collision insurance?– A tree falls on your car while parked in a

parking lot.

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Collision insurance

• Are you covered by Collision insurance?– A tree falls on your car while parked in a

parking lot.

No, you were not in a collision—you did not run into anything.

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Collision insurance

• Are you covered by Collision insurance?– You back into a fire hydrant and crumple your

bumper

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Collision insurance

• Are you covered by Collision insurance?– You back into a fire hydrant and crumple your

bumper

Yes, you ran into something—it was a collision. Collision insurance will pay to repair your car.

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Collision insurance

• Are you covered by Collision insurance?– A block of wood flies out of the pickup truck in

front of you and smashes into your windshield, cracking it

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Collision insurance

• Are you covered by Collision insurance?– A block of wood flies out of the pickup truck in

front of you and smashes into your windshield, cracking it

No, this is not considered a collision. We’ll learn more about this situation in a moment.

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Collision insurance

• Are you covered by Collision insurance?– You are speeding around a turn, lose control,

and your car flips over three times. Your car didn’t run into anything but has damage to the roof, hood, and doors.

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Collision insurance

• Are you covered by Collision insurance?– You are speeding around a turn, lose control,

and your car flips over three times. Your car didn’t run into anything but has damage to the roof, hood, and doors.Yes, you were in an “upset” which is covered by your collision insurance.

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Comprehensive insuranceYou car is damaged by anything except

collision or upset.

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Comprehensive• You car is damaged by

anything except collision or upset

• Comprehensive includes things like falling objects, floods, fire, hail, theft, vandalism, and colliding with an animal.

• NOT required by state of California

Hope they have “comprehensive” car insurance!

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Comprehensive• Has a “deductible”


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Value of your car


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– For example: You have $4,000 of comprehensive damage and a $1000 comprehensive deductible policy. You will pay $1000 and the insurance company will pay the remaining $3,000.

$4000 damage


by you


Comprehensive

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OPTIONAL

Comprehensive

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Comprehensive

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Premium

$500 deductible

Premium

$1000 deductible

Car Value Car Value

Comprehensive

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Your comprehensive deductible should be the same as your collision deductible.

Premium

$500 deductible

Car Value

Premium

$500 deductible

Car Value

Collision Comprehensive

Comprehensive

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If you have a older car that you’re not making payments on, you may consider not buying this insurance at all.

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Comprehensive insurance

• Are you covered by Comprehensive insurance?– Your car is stolen

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• Are you covered by Comprehensive insurance?– Your car is stolen

Yes, Comprehensive insurance covers theft.

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• Are you covered by Comprehensive insurance?– You run over your garbage can and damage the

axle of your car.

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• Are you covered by Comprehensive insurance?– You run over your garbage can and damage the

axle of your car.

No, this is a collision, not a comprehensive loss.

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• Are you covered by Comprehensive insurance?– A block of wood flies out of the pickup truck in front

of you and smashes into your windshield, cracking it

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• Are you covered by Comprehensive insurance?– A block of wood flies out of the pickup truck in front

of you and smashes into your windshield, cracking it

Yes, Comprehensive covers falling objects.

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• Are you covered by Comprehensive insurance?– You skid off the road and drive into small creek.

Your car has no dents but does have $2,000 of water damage.

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• Are you covered by Comprehensive insurance?– You skid off the road and drive into small creek.

Your car has no dents but does have $2,000 of water damage.

Yes, Comprehensive covers flooding.

Insurance review

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What type of insurance will pay?

You are driving too fast, skid off the road, and slide into a tree, denting the passenger door of your car. No one is hurt. You want your car repaired.

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A thief steals my car and the police chase him. The thief crashes my car into a brick wall. My car is a total loss. I want money to replace my car.

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My brother, who does not live in the same house as me, borrows my car to go to the store. He has my permission to drive it. At the store, while smoking crack cocaine in the car, he accidentally sets the car on fire. I need money for a new car.

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You are driving on a two lane country road. A truck, going the other way, kicks a rock up off the road cracking your windshield. You turn around, follow the truck and get it’s license plate. You want your windshield repaired or replaced.

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You are driving on a two lane country road. A truck, going the other way, kicks a rock up off the road cracking your windshield. You are not able to identify the truck. You want your windshield repaired or replaced.

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You are backing up in a parking lot and bump into a car that was waiting to take your parking place. Their car’s bumper is dented but your car seems fine. The owner of the other car wants their bumper repaired.

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A raccoon got into your car while your were camping. The raccoon tore up the seats in your car. You want the seats repaired or replaced.

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A kid threw a rock at your car and ran away. Now you have a big dent on the driver’s door. You want the dent repaired.

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A big wind came up while you were on the freeway and pushed your car. You tried to maintain control but swerved into the car that was passing you on the left. The other car ran off the road and flipped over. The driver was hurt. The other car’s driver wants money for their medical bills and to have their car repaired.

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A kid wants to cross the street and just runs out in front of your car. You hit the kid, knocking him to the ground. His wrist is hurt and he’s crying. His mother comes out of a house and takes him to the hospital. She wants you to pay for the emergency room treatment.

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What is a “deductible” and which parts of auto insurance

have a “deductible”?

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Now, quickly,the last 3 coverages…

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Medical Payments insurancePays for medical attention to anyone who is hurt

while in your car—even you.

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Medical Payments• Pays for medical attention to

anyone who is hurt while in your car—even you.

– For example, pays for ambulance, surgery, hospital, even prosthetic devices and funeral expenses

• NOT required by the state of California

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Medical Payments insurance• Pays regardless of who was at fault• Even pays if you are not in a car at all—

even if you are just a pedestrian or are on a bicycle.

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Medical Payments insurance

Only begins to pay after all other medical insurance you may have is exhausted.

(this idea is called “secondary” insurance. Medical Payments is an example of “secondary” insurance)

Medical Payments

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OPTIONAL

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Uninsured Motorist insurance

Pays if you or your passengers are physically hurt by an uninsured (or underinsured) driver

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Uninsured Motorist insurance• You or your passengers are physically hurt

by an uninsured (or underinsured) driver• The other driver should have Bodily Injury

Liability insurance to cover your injuries.• Uninsured Motorist insurance covers what

the other driver should have, but may not.

Uninsured Motorist

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OPTIONAL

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Towing and Road Service insurance

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Towing and Road Service insurance

• Your car won’t run and needs to be towed

• “Road Service” includes things like a tire change or a jump start or keys locked in car

Towing and Road Service

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This part of car insurance is cheap.(less than $5 a month)You will lock your keys in the car.You will run out of gas.

Towing and Road Service

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OPTIONAL

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7 parts of car insurance








Car insurance has 7 parts7 premiums7 policy limits

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One more thingabout insurance for carsbought on credit…

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Gap Insurance

Loan:$24,000

Car Value:$20,000

Gap

Gap Insurance

• You take out a loan to buy a car

Loan:$24,000

Car Value:$20,000

Gap

Gap Insurance

• You take out a loan to buy a car• You have collision and

comprehensive insurance

Loan:$24,000

Car Value:$20,000

Gap

Gap Insurance


comprehensive insurance• You total your car or your car is

stolen.

Loan:$24,000

Car Value:$20,000

Gap

Gap Insurance



stolen.• The insurance company pays

you the current value of the car Loan:$24,000

Car Value:$20,000

Gap

Gap Insurance




you the current value of the car• You still have to pay off the loan

Loan:$24,000

Car Value:$20,000

Gap

Gap Insurance




you the current value of the car• You still have to pay off the loan• The current value of the car is

less than what you owe on the loan—you have a “gap”

Loan:$24,000

Car Value:$20,000

Gap

Gap Insurance

Avoid needing Gap Insurance 1:make a big down payment

Avoid needing Gap Insurance 2:small down payment and short loan period

Avoid needing Gap Insurance 3:pay cash for your car

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Review

These are the only two types of insurance required by the state of California:

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Review

These are the only two types of insurance required by the state of California:–Bodily Injury Liability–Property Damage Liability

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Review

This will pay for people you hurt:

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Review

This will pay for people you hurt:–Bodily Injury Liability

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Review

This will pay to repair or replace other people’s property that you damage:

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Review

This will pay to repair or replace other people’s property that you damage:–Property Damage Liability

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Review

These will pay for damage to your car:

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Review

These will pay for damage to your car:

–Collision–Comprehensive

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Review

These have a deductible—money you have to pay before the insurance company starts paying.

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Review

These have a deductible—money you have to pay before the insurance company starts paying.–Collision–Comprehensive

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Review

These will pay for damage to you:

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Review

These will pay for damage to you:–Medical Payments–Uninsured Motorist

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---end of presentation---

Car insurance

Education

Transcript of Car insurance